Rack BC — Contingency Theory

TAOP Resources Library -- Aisle B (Theories)

Resources: Main Page | Research Methods (A) | Major Theories (B) | Issues and Contemporary Topics (C) | Professional Education (D)

Rack BC (Contingency / Contextual Theories): Contingency Theory — Contingency Modeling — Path-Goal Theory — Pragmatism — Structural Adaptation — Professions and occupations — Paradox Theory

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What is Contingency Theory and Why is it Important?

The idea that there was no “one best way” to organize across all contexts, a direct challenge to the ideas of Taylorism and scientific management, goes way back to the works of Mary Parker Follett (Metcalf & Urwick, 1943; see Episodes 5 on the “Law of the Situation” and 91). But it would take formal shape through the emergence of the open systems perspective, including the works of Lawrence and Lorsch.

Paul Lawrence and Jay Lorsch were among the earliest scholars looking at the relationship between organizational characteristics and their environment, and stipulate that an organization’s economic performance is determined by its ability to meet integration and differentiation requirements according to their environment. (we covered one of their papers in Episode 16). Important figures in the field of management and organizational studies, their collaboration produced important works including the award winning book Organization and Environment: Managing Differentiation and Integration (1967) and a series of papers which advance an open systems perspective on organizations. Their work led to the so-called contingency school that viewed the optimum structuring of work depending (i.e., is “contingent”) on the external and local conditions in which an organization is inserted. Other later works on firm behavior, such as Pettigrew (1987, see Episode 27), would derive similar conclusions.

The benefits of contingency theory in practice are many, and we include just a few examples here. One is the ability to account for environmental, cultural, technological, and situational factors. It suggests that these variables directly impact how an organization should be structured and how it operates. For instance, what works for a startup may not work for a large multinational corporation, and this theory helps in recognizing such differences. Another is the need for organizations to be flexible and adaptable to changing conditions (also see Rack CA). This adaptability is crucial in a rapidly changing world where organizations navigate various dynamic and diverse challenges and opportunities. Finally, there are implications for leaders who should align their organizations with contextual factors, such as the nature of the task, the maturity of the team, or the organizational culture. For example, a more authoritarian leadership style may work in crisis situations, while a participative style may be better for creative, collaborative teams.

Some Leading Contingency Theories & Concepts

Contingency theory is, however, very broad. Various literature streams have emerged that focus on specific environmental factors and organizational responses to them. This has helped with guiding researchers toward feasible and defensible projects. Here is a sample of some of these streams.

Structural Contingency Theory. This stream focuses on the relationship between organizational structure and environmental factors. It posits that organizations must adapt their structures to fit their environments to achieve effectiveness. pioneered by scholars like Joan Woodward (see Episode 60), Charles Perrow (see Episode 76), and Paul Lawrence & Jay Lorsch (see Episode 16). They focused on how different technologies and environments require different organizational structures. Woodward’s seminal studies showed that successful manufacturing firms had different structures depending on their production technology (unit, mass, or process production). Lawrence and Lorsch extended this by demonstrating how different environmental conditions require varying levels of differentiation and integration within organizations.

Strategic Contingency Theory. This perspective focuses on the relationship between organizational strategy and performance. It posits that organizations must align their strategies with their internal capabilities and external opportunities to achieve superior performance. This stream was developed by scholars like Derek S. Pugh, David Hickson, and Bob Hinings (see Episode 65 on the Aston School), examines how power distribution in organizations depends on how different units cope with strategic contingencies. They argued that organizational units gain power by managing critical uncertainties facing the organization. For example, in a pharmaceutical company, the R&D department might hold more power because it manages the critical uncertainty of developing new drugs.

Environmental Contingency Theory. This perspective examines how external environmental factors influence organizational behavior and performance. It emphasizes the need for organizations to adapt to changes in their external environments, such as market dynamics, regulatory changes, and technological advancements. This stream is associated with scholars like Tom Burns and G.M. Stalker (see Episode 98), and later population ecologists, examines how different types of environments require different organizational forms. They introduced the distinction between mechanistic structures (suitable for stable environments) and organic structures (better for dynamic environments).

Technological Contingency Theory. This stream explores the impact of technology on organizational structure and processes. It posits that the type of technology used by an organization influences its design and management practices. For instance, Woodward’s research identified different organizational structures associated with various production technologies, suggesting that organizations must align their structures with their technological contexts (Nissen, 2009). This perspective is crucial for understanding how technological advancements can drive organizational change.

Task Contingency Theory. This is associated with Jay Galbraith (see Episode 83) and others, focuses on how information processing requirements, determined by task uncertainty, should match an organization’s capacity to process information. When tasks are highly uncertain, organizations need more sophisticated information processing mechanisms like liaison roles or matrix structures.

Contemporary Research Areas

Contingency theory research is highly active and there are many practical applications and concerns, with some of these also referenced in the contemporary topics in Aisle C.

Strategic management. Scholars are increasingly examining how organizations can create strategic fit by aligning their structures and processes with their external environments. For instance, Eva et al. (2018) highlights the importance of understanding the interplay between organizational strategy and structure as moderators in the relationship between leadership styles and performance outcomes. This research underscores the necessity for organizations to adapt their strategies to the unique challenges posed by their environments, thereby enhancing their overall effectiveness.

Crisis management. Contingency theory shows promise for understanding how organizations can effectively navigate crises by adapting their communication strategies to the situational demands. Researchers are examining how organizations adapt their structures and processes to handle different types of crises, and how these adaptations might vary based on organizational characteristics and environmental conditions (see Episode 64). A current example is Boman et al. (2020) who explored the U.S. Coast Guard’s communication strategies during Hurricane Harvey, demonstrating how contingency factors influenced their stance and messaging.

Digitization and technology adoption. Contingency theory is also being applied toward digitization and technology adoption (also see Rack CD). Some examples of such research include how organizations: govern their information technology investments through a contingency lens, investigating the extent to which effectiveness of IT governance is contingent upon the organization’s specific goals and environmental factors (Ali et al., 2021), can leverage enterprise social media platforms to adapt to digital changes while considering their internal and external contingencies (Jorge et al., 2022), and can effectively implement AI-integrated customer relationship management systems by considering both contingency factors and dynamic capabilities (Chatterjee et al., 2022).

Other Areas. Some other research areas apply contingency theory to organizational performance measurement systems and how contextual variables influence the design and effectiveness (Ibrahimi & Naym, 2019), on how humanitarian supply chains can integrate green practices by considering the contingency factors that impact their environmental sustainability (Zarei et al., 2019), and a cross-country analysis that emphasizes the relevance of contingency theory over normative isomorphism in understanding the management tools utilized by public sector executives (George et al., 2019).

Related TAOP Episodes, Events, and Notes

104: Social Structure & Organizations — Stinchcombe

In a famous chapter in James G. March’s 1965 book, Handbook of Organizations, Arthur L. Stinchcombe laid out a case for expanding the study of organizations outward to include social structure bringing attention to innovation as well as imprinting and inertia. He posited that societies had significant effects on how organizations emerge and operate and that organizations, in turn, impact relations among groups in society. He presented his arguments in three parts. First, that social structures had an imprinting effect on the formation of new organizations, such that these initial forms often persisted despite efforts to change them. Thus, to the second point, each type of organization reflected the history of its creation both in terms of the organization and social structures that dominated at the time. Finally, organizations also reflect the social divisions in society, such as between higher and lower classes.

91: Constructive Conflict – Mary Parker Follett

We return to the works of Mary Parker Follett and expand upon “The Law of the Situation” that we covered in Chapter 5. In this episode, we revisit Dynamic Administration with a look at the first five chapters as a whole – focusing on Chapter 1 (“Constuctive Conflict”), Chapter 3 (“Business as an Integrative Unity”), Chapter 4 (“Power”), and Chapter 5 (“How Must Business Management Develop in order to Possess the Essentials of a Profession”) that introduced Follett’s conception of professionalizing business.

90: Organizations in Action – James Thompson

We will examine James D. Thompson’s “Organizations in Action: Social Science Bases of Administrative Theory” from 1967 that established a new direction in organization studies. Beginning with a recapitulation of the theoretical work of the time, Thompson expanded the dominant rational model of organizing with the emerging ideas about human behaviour, complexity, and the relation between organizations and their environments. The result was a proposed theory of administration that remains relevant to this day.

60: Contingency Theory — Joan Woodward

Joan Woodward was a pioneer in organization theory, and in this episode we explore her seminal work Industrial Organization: Theory and Practice, originally published in 1965. The book presents the results of an extensive longitudinal study of the technologies, processes, and systems used by over one hundred industrial firms concentrated in southeast England over a ten year period.

58: Contingency Approach – AOM 2019 Workshop LIVE

This professional development workshop focuses on the contingency approach as exemplary of classic scholarship in organization and management theory. We focus on the historical context of the contingency approach, the main ideas of authors and traditions associated with it, and their connections with contemporary research.

16: Contingency Theory – Lawrence and Lorsch

We discuss Paul Lawrence and Jay Lorsch’s book “Organization and Environment: Managing Differentiation and Integration” and a series of papers which advance an open systems perspective on organizations. The contingency school postulates that there is not one best way to structure work or an organization. An optimum course of action depends – is contingent – on the external and local conditions in which an organization is inserted.

14: Simply Managing, by Henry Mintzberg

The book we analyzed in this episode, Simply Managing (2013), is an updated study of managers conducted by Henry Mintzberg based on observing 29 managers at all levels of organizations across a range of industries and organizational structures: business, government, healthcare, and pluralistic organizations such as museums and non-governmental organizations.

A Letter About Mary Parker Follett

Our discussion of Mary Parker Follett’s “The Giving of Orders” inspired one of our listeners and co-author of a book on Follett’s work to contribute a post. Davis provides further background on her works and elaborates on some points made in our conversation.

5: The Law of the Situation – Mary Parker Follett

This episode is a review of one of Mary Parker Follett’s great lectures, “The Giving of Orders,” contained in a collection of Follett’s lectures and writings that was assembled by Lyndall Urwick at the end of her life in an effort to preserve her ideas for others. Follett believed that exploring “the science of the situation” involved both management and workers studying the situation together.

Aisle B – Major Theoretical Perspectives and Schools

Curated list of resources regarding major theories and schools of thought in organization studies. Groups a wide range of theoretical perspectives in line with common categorizations; other perspectives are welcome.

Rack BA — Classic Organization and Management Theory

Curated list of resources regarding the major “classical” theories that initiated the field of organization studies, beginning with Taylorism and scientific management and continuing with the theories Fayol, Weber, and others.

Rack BB1 – Organizational Behavior (Micro-Individual)

Curated list of resources regarding the major theories of organization behavior such as emotions, sensemaking, socialization and organizational climate, and many others.

Rack BB2 — Organizational Behavior (Meso-Groups and Teams)

Curated list of resources regarding theories on groups, teams, and other small collections of individuals within an organizational context, from the worker level to top management teams.

Rack BB3 — Organizational Behavior (Macro-Org/System)

Curated list of resources on open systems theory and its many descendents such as general systems theory, cybernetics, and organizational ecology

Rack BC — Contingency Theory

Curated list of resources regarding the major theories regarding the organizational context and how particular situations influence organizational structures, behaviors, and so on. Includes classic contingency theories and pragmatism.

Rack BD — Organizational Design

Curated list of resources on theories related to organizational structures and design, including control structures, power, and job design

Rack BG — Organizational Development and Change

Curated list of resources regarding various theories regarding the external environment in organizations, such as labor relations, resource dependence theory, and others.

Rack BH – Human Dimension – Culture, Climate, Identity

Curated list of resources regarding sustainability and corporate social responsibility such as sustainable business practices, responses to climate change, sociomateriality, and ethical considerations

Rack BI — Institution Theory

Curated list of resources on theories related to strategic management, including competitive forces models, resource-based perspectives, and organizational strategies and strategic change

Rack BL — Leadership Theories

Curated list of resources on theories related to leadership in organizations including classic trait theory, behavioral theories of leadership, and transactional / transformational leadership

Rack BM – Modern Management Theories

Curated list of resources regarding the major schools of thought and the theoretical perspectives they established. Includes the Carnegie-Mellon School, Aston School, and others.

Rack BQ — Postmodern and Critical Theories

Curated list of resources on postmodernist views of organizations and organizing and contrasting them with the modernist view. Includes critical management studies and complexity theory

References

Ali, S., Green, P., Robb, A., & Masli, A. (2021). Governing information technology (it) investment: a contingency perspective on organization’s it investment goals. Australian Journal of Management, 47(1), 3-23. https://doi.org/10.1177/03128962211009578

Anthropic. (2024). What are the foundational literature streams in contingency theory in organization studies; What are some of the contemporary areas of research in contingency theory. Claude (March 2024 version) [Large Language Model].

Boman, C., Valiavska, A., Bramlett, J., & Cameron, G. (2020). Exploring the u.s. coast guard’s stance agility on twitter during hurricane harvey. Journal of Contingencies and Crisis Management, 29(1), 47-53. https://doi.org/10.1111/1468-5973.12307

Burns, T. & Stalker, G. M. (1961). The Management of Innovation. Tavistock Publications Limited.

Chatterjee, S., Mikalef, P., Khorana, S., & Kizgin, H. (2022). Assessing the implementation of ai integrated crm system for b2c relationship management: integrating contingency theory and dynamic capability view theory. Information Systems Frontiers, 26(3), 967-985. https://doi.org/10.1007/s10796-022-10261-w

Eva, N., Sendjaya, S., Prajogo, D., Cavanagh, A., & Robin, M. (2018). Creating strategic fit. Personnel Review, 47(1), 166-186. https://doi.org/10.1108/pr-03-2016-0064

Galbraith, J. R. (2014). Designing organizations: Strategy, structure, and process at the business unit and enterprise levels, 3^rd ed. New York: Jossey-Bass.

George, B., Walle, S., & Hammerschmid, G. (2019). Institutions or contingencies? a cross‐country analysis of management tool use by public sector executives. Public Administration Review, 79(3), 330-342. https://doi.org/10.1111/puar.13018

Ibrahimi, M. and Naym, S. (2019). The contingency of performance measurement systems in moroccan public institutions and enterprises. Meditari Accountancy Research, 27(4), 613-632. https://doi.org/10.1108/medar-05-2018-0336

Jorge, L., Mosconi, E., & Santa-Eulalia, L. (2022). Enterprise social media platforms for coping with an accelerated digital transformation. Journal of Systems and Information Technology, 24(3), 221-245. https://doi.org/10.1108/jsit-08-2021-0154

Lawrence, P. R. & Lorsch, J. W. (1967). Organization and environment: Managing differentiation and integration. Boston: Division of Research, Graduate School of Business Administration, Harvard University.

Lawrence, P., & Lorsch, J. (1967). Differentiation and integration in complex systems, Administrative Science Quarterly, 12(1), 1-47.

Metcalf, H. C., & Urwick, L. (1943). Dynamic administration: The collected papers of Mary Parker Follett. Harper Brothers. Chapters 1, 3-5.

OpenAI. (2024). Why is contingency theory important for organization studies. ChatGPT (November 2022 version) [Large Language Model].

Perrow, C. (1967). A framework for the comparative analysis of organizations. American Sociological Review, 32(2), 194-208.

Pettigrew, A. M. (1987). Context and action in the transformation of the firm. Journal of management studies, 24(6), 649-670.

Pugh, D. S., Hickson, D. J., Hinings, C. R., & Turner, C. (1969a). The context of organization structures. Administrative science quarterly, 91-114.

Pugh, D. S., Hickson, D. J., & Hinings, C. R. (1969b). An empirical taxonomy of structures of work organizations. Administrative science quarterly, 115-126.

Scite. (2024). What are the foundational literature streams in contingency theory in organization studies; What are the top five foundational texts in contingency theory; Why is contingency theory important for organization studies; What are some of the contemporary areas of research in contingency theory. Scite (April 2024 version) [Large Language Model].

Woodward, J. (1980). Industrial organization: Theory and practice, 2nd ed. New York: Oxford University Press.

Zarei, M., Carrasco‐Gallego, R., & Ronchi, S. (2019). To greener pastures. International Journal of Operations & Production Management, 39(11), 1193-1225. https://doi.org/10.1108/ijopm-12-2018-0703

Jump to: Importance | Theories | Research Areas | TAOP Episodes | References

Resources: Main Page | Research Methods (A) | Major Theories (B) | Issues and Contemporary Topics (C) | Professional Education (D)

Rack BC — Contingency Theory

TAOP Resources Library -- Aisle B (Theories)

Jump to: Importance | Theories | Research Areas | TAOP Episodes | References

What is Contingency Theory and Why is it Important?

Some Leading Contingency Theories & Concepts

Contemporary Research Areas

Related TAOP Episodes, Events, and Notes

Available Resource Pages

References

Jump to: Importance | Theories | Research Areas | TAOP Episodes | References